Banks Ready Proposals to Fund Possible Sprint Bid for T-Mobile US

Ryan Knutson and Dana Cimilluca reported that at least a half dozen banks are working on proposals for financing a bid by Sprint for T-Mobile US, another sign Sprint is laying the groundwork for a potential offer for its smaller rival. Financing offers for a deal, which could be worth more than $20 billion, could be in place in January, our reporters disclosed.

At least half a dozen banks are working on proposals for financing a bid by Sprint Corp. for T-Mobile US Inc., people familiar with the matter said, another sign that Sprint is laying the groundwork for a potential offer for its smaller rival.

Financing offers for a deal, which could be worth more than $20 billion, could be in place in January, these people said. People familiar with the matter said last week that Sprint is contemplating a bid for T-Mobile that could come together in the first half of 2014.

On Thursday, Masayoshi Son, chief executive of Sprint owner SoftBank Corp. and chairman of Sprint, was in New York meeting with senior bank executives including Goldman Sachs Group Inc. CEO Lloyd Blankfein, according to two people familiar with his schedule. The meeting had long been planned, according to one of these people, and it is not clear what was discussed.

The names of the banks that are vying for the deal-financing business couldn’t be learned.

Sprint, which is more than 80% owned by Japan’s SoftBank, hasn’t yet decided whether to move forward with a bid, said one of the people familiar with the plans. The company is currently studying regulatory hurdles a bid would likely encounter.

Deutsche Telekom AG, which owns about 67% of T-Mobile, has been considering exiting the U.S. market.

The value of a deal would depend on the size of any stake Deutsche Telekom sells.

T-Mobile currently has a market value of $21.8 billion. Its stock, which rose 8.7% Thursday to $29.61, has risen 16% since The Wall Street Journal reported Friday on the possible move by Sprint.

Even if the financing comes together and a deal is agreed, getting a transaction past regulators could be the hardest part. In an April letter to the Federal Communications Commission, the Justice Department said it favored having four national competitors in the wireless industry. A merger of Sprint and T-Mobile would combine the third and fourth largest players.

If successful, a combination of the companies would help them gain more scale in the capital intensive wireless industry where having more customers helps overcome the high cost of building and maintaining networks, as well as retail and support operations.

Industry giants AT&T Inc. and Verizon Wireless spend billions more each year on wireless infrastructure than their smaller rivals. AT&T and Verizon each have more contract subscribers and have collected more revenue so far this year than Sprint and T-Mobile combined.

An analyst report from J.P. Morgan Chase & Co. estimates that merging Sprint and T-Mobile would eliminate $5 billion in annual costs, if a deal were done. The combined market value of the two companies is about $57 billion.

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